Faster, Better, Cheaper in the History of Manufacturing

From the Stone Age to Lean Manufacturing and Beyond

Christoph Roser

• Publisher: Productivity Press
• Year: 2016
• ISBN:
  9781315350912
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Negocios en general

The industrial revolution, mechanization, water and steam power, computers, and automation have given an enormous boost to manufacturing productivity. "Faster, Better, Cheaper" in the History of Manufacturing shows how the ability to make products faster, better, and cheaper has evolved from the stone age to modern times. It explains how different developments over time have raised efficiency and allowed the production of more and better products with less effort and materials, and hence faster, better, and cheaper. In addition, it describes the stories of inventors, entrepreneurs, and industrialists and looks at the intersection between technology, society, machines, materials, management, and – most of all – humans.

"Faster, Better, Cheaper" in the History of Manufacturing follows this development throughout the ages. This book covers not only the technical aspects (mechanization, power sources, new materials, interchangeable parts, electricity, automation), but organizational innovations (division of labor, Fordism, Talyorism, Lean). Most of all, it is a story of the people that invented, manufactured, and marketed the products.

The book shows how different developments over time raised efficiency and allowed production of more with less effort and materials, which brought us a large part of the wealth and prosperity we enjoy today. The stories of real inventors and industrialists are told, which includes not only their successes but also their problems and failures. The effect of good or bad management on manufacturing is a recurring theme in many chapters, as is the fight for intellectual property through thrilling tales of espionage. This is a story of successes and failures. It is not only about technology but also about social aspects. Ultimately, it is not a book about machines but about people!

1

Failure and Success in Manufacturing—The General Motors–Toyota NUMMI Joint Venture

I’m part of the team; I don’t have a team. Let people maintain their own personality.

Rick Madrid
Team leader at NUMMI

The General Motors (GM) Fremont plant, around 1980, was one of the worst automotive plants ever to operate in the United States (Womack 1990, p. 81). Even the United Auto Workers (UAW) union representatives—who rarely see problems with its members—considered Fremont to have the worst workforce ever (Siegel 2010). A host of problems plagued it, mostly stemming from very low morale of the employees.

The quality of GM was already mediocre at best, but the quality of the vehicles produced in Fremont was the worst within GM (Shook 2010). Workers intentionally sabotaged many vehicles. For example, empty cola bottle caps were left in the doors with the sole purpose to annoy the customer through its clanking sound. Or worse, half-eaten tuna sandwiches were welded in (Childress 2013, p. 219). Cars were intentionally scratched. Screws on safety-critical parts were deliberately left loose. The employees wanted to hurt the company by hurting the customer.

Even if the workers tried to produce quality products, the system worked against them. The most important rule in the Fremont plant was to never, ever stop the assembly line. Even in the case of accidents, the line did not stop. Hence, all problems were simply pushed downstream, resulting in miserable quality at the end of the line. Sometimes, engines were installed backward; other cars had brakes or steering wheels missing. Some cars would be half of one model and another half of a completely different model. Many cars arrived at the end of the line incomplete or defective, unable to drive, and they had to be towed (Glass 2010).

All kinds of illegal activities were also readily available within the plant. Sex, drugs, and gambling were widespread. A large part of the workforce was drunk, if they showed up at all. On an average day, one out of five people simply did not show up, with Mondays being considerably worse. Yet, the assembly line must not stop. Some days, when there were too few people to start the line, management simply hired people from the bar across the street on the spot so they could start the line. Of course, this worsened quality even more (Siegel 2010).

People hated working there, yet due to a lack of alternatives, they had to stay with their secure jobs. The only thing they did with enthusiasm was quarrel and fight. Both workers and management were constantly occupied with disputes, mostly through formal grievances, even for minor disagreements. Strikes, including wildcat, strikes were common. Management did not help either by belittling and micromanaging its workers.

Finally, GM had enough and put this sorry excuse of a plant out of its misery. The plant closed in March 1982, and 5000 people lost their jobs with only three weeks’ notice (Turner 1990).

Two years later, the plant reopened as a Toyota–GM joint venture named New United Motor Manufacturing, Inc., better known as NUMMI. Production restarted in the same buildings as the old Fremont plant (adding only a stamping plant). The manufacturing technology was also not much different (Adler, Goldoftas, and Levine 1998). Incredibly, they rehired mostly former employees of the old Fremont plant. With virtually the same machines, materials, and manpower, it looked like NUMMI was destined to repeat the previous miserable manufacturing system.

To everybody’s surprise, the plant turned out to be the best automotive plant in the United States. Quality by far exceeded that of any other GM plant. In fact, quality exceeded that of any other U.S. automotive plant and was very close to the then-legendary quality of the Toyota plants in Japan.* Productivity also soared, and the new NUMMI plant produced almost twice as many vehicles with the same labor force as before.* The cost per vehicle was reduced by $750 (Keller 1989, p. 130). Even employee morale, previously the biggest handicap to success, reached amazingly high levels.^† Absenteeism, previously at 20%, reached very low levels, below 3%. Annual employee turnover was also less than 6% (Adler 1995). Many workers, for the first time in their lives, enjoyed coming to work.

What happened? What turned the pathetic old Fremont plant into the stellar outperforming NUMMI plant, and that with the same workforce, to boot?

Toyota changed the culture in the plant. The manufacturing system used the same hardware, but the software of running a manufacturing system was very different. Toyota was able to implement its highly successful Toyota Production System at NUMMI. There were too many changes to list them all here, but probably the biggest change was that Toyota worked with the workers, not against them. Toyota treated its workers with respect, valued their input, and not only allowed but even encouraged them to make decisions related to their workplace. While Fremont was based on conflict, NUMMI was based on teamwork, and everybody was treated with respect and fairness.

Another major difference was the focus on quality. At Fremont, the quality control department checked quality after production. At NUMMI, every worker was responsible for quality. At Fremont, the most important rule was to never, ever stop the assembly line. At NUMMI, workers not only were allowed to stop the line, they even had to stop the line if there was a quality problem. As a result, Fremont needed 12% of its space for rework, whereas NUMMI used only 7% (Keller 1989, p. 132).

The hiring of new employees also received much more significance. On average, NUMMI personnel spent 35 hours with every potential new employee during the hiring process. This was not only to find good employees but also to instill a sense of importance into the potential employees (Keller 1989, p. 132). In comparison, Fremont sometimes simply picked up new temporary employees in the bar across the street.

There were many other changes. For example, the workers’ assignments were more flexible, as the number of job categories was reduced from 183 to 4. There was a strong focus on reducing waste and streamlining the manufacturing process. Floor space was used much more efficiently (Keller 1989, p. 129). Many things were done differently, creating a new superior manufacturing system that made NUMMI the best automotive plant in America.

One of the goals of GM in this joint venture was to learn the secret of Toyota. They wanted to understand the magic with which the Japanese produced superior cars at lower cost. Only, there was no secret. It was respect, common sense, and hard work to improve lots of little details.

GM wanted to apply the learnings from NUMMI to its other plants. Except, they did not get it. They did not get it at all. The former Fremont plant had a culture of oppression, threats, and distrust. NUMMI was based on respect, trust, and teamwork. However, GM management used the only management style they knew and wanted to force and bully their employees at other plants into trusting them. Incredibly, they set up a competition between two plants, Van Nuys near Los Angeles and Norwood in Cincinnati. The loser would be shut down.

Unsurprisingly, this trust me or get fired approach did not work. From the beginning, most employees were highly suspicious about this new NUMMI thing. Union representatives of these plants called it the most dangerous scheme ever conjured up by GM to rob workers of their union. They were suspicious that all of this was just a tool for layoffs. Actually, they were right, as GM indeed wanted to reduce the headcount by 25% (Keller 1989, p. 137f). Norwood rejected the NUMMI approach altogether, and nothing was implemented. Van Nuys reluctantly played along, but their heart was never in it.

Van Nuys mechanically implemented many of the successful approaches at NUMMI, but without the trust of the workers, these did not work. For example, the ability to stop the line soon led to the line being stopped so often that both productivity and quality declined (Keller 1989, p. 139). Both management and employees resisted the change, and any ideas connected with NUMMI often met stiff resistance in other plants simply because it was from NUMMI.

This lack of understanding and disinterest also extended to the upper management. A Toyota manager said that GM understood the changes as far as the hardware and the plant layout are concerned. But I’m afraid that GM upper management doesn’t understand the basic concept (Inkpen 2008). Toyota executives visiting NUMMI were very interested in the details on the shop floor. GM executives, on the other hand, did a five minute fly-by, looking for a magic bullet that they can delegate others to implement in other plants. A GM boardroom meeting on the secret of NUMMI drew on 25 studies and lots of data but resulted only in a huge discussion without any conclusion (Keller 1989, p. 142).

Toyota, on the other hand, learned successfully how to work with U.S. unions (Clarke 2002), preparing them for further ventures into U.S.-based Toyota plants. They also kept their NUMMI graduates in larger groups of 30 to 60 people, whereas GM diluted their impact by having them fight the GM culture in other plants alone (Finkelstein 2004). Toyota also proved that the Toyota Production System is not dependent on the Japanese culture but can also be successfully applied in other countries. Nowadays, Toyota has plants in more than 20 countries (Reingold 1999, p. 64) and produces in excess of 50% of all Toyota vehicles outside of Japan (Marsh 2012, p. 56).

At GM, Van Nuys eventually won the deplorable competition, and GM closed Norwood in 1987. However, Van Nuys did not have much time to enjoy its victory, as GM also closed it only five years later in 1992.

Overall, GM learned little. Especially, top management resisted the change. While GM did improve some aspects eventually (Sato 2008, p. 255), it was not enough to turn things around. In 2009, GM had the biggest bankruptcy in U.S. history, costing taxpayers $50 billion (Siegel 2010). Toyota, on the other hand, became the largest carmaker in the world and is highly profitable.

BIBLIOGRAPHY

Adler, P.S., 1995. Democratic Taylorism: The Toyota Production System at NUMMI, in: Lean Work: Empowerment and Exploitation in the Global Auto Industry. Wayne State University Press, Detroit, MI.

Adler, P.S., Goldoftas, B., Levine, D.I., 1998. Stability and Change at NUMMI, in: Between Imitation and Innovation: Transfer and Hybridization of Production Models in the International Automobile Industry. Oxford University Press, Oxford, UK.

Childress, J.R., 2013. Leverage: The CEO’s Guide to Corporate Culture. Principia Associates, London.

Clarke, C., 2002. Forms and Functions of Standardisation in Production Systems of the Automotive Industry: The Case of Mercedes-Benz (Doctoral). Freie Universität Berlin, Berlin.

Finkelstein, S., 2004. Why Smart Executives Fail: And What You Can Learn from Their Mistakes. Portfolio, New York.

Glass, I., 2010. “NUMMI.” This American Life. Radio broadcast from Public Radio International.

Inkpen, A.C., 2008. Knowledge Transfer and International Joint Ventures: The Case of NUMMI and General Motors. Strategic Management Journal 29, 447–453. doi:10.1002/smj.663.

Keller, M., 1989. Rude Awakening: The Rise Fall and Struggle for Recovery of General Motors. William Morrow & Co, New York.

Marsh, P., 2012. The New Industrial Revolution. Yale University Press, New Haven, CT.

Reingold, E.M., 1999. Toyota—A Corporate History. Penguin, London.

Sato, M., 2008. The Toyota Leaders: An Executive Guide. Vertical, New York.

Shook, J., 2010. How to Change a Culture: Lessons from NUMMI. MIT Sloan Management Rev. 51(2), 63–67.

Siegel, R., 2010. “The End of the Line for GM–Toyota Joint Venture.” All Things Considered. Radio broadcast from National Public Radio.

Turner, L., 1990. NUMMI—Japanische Produktionskonzepte in den USA. Articles and Chapters. In M. Muster & U. Richter (Eds.), Mit Vollgas in den Stau: Automobilproduktion, Unternehmensstrategien und die Perspektiven eines ökologischen Verkehrssystems, 78–87, VSA-Verlag, Hamburg, Germany.

Womack, J.P., 1990. The Machine That Changed the World: Based on the Massachusetts Institute of Technology 5-Million-Dollar 5-Year Study on the Future of the Automobile. Later Printing. Scribner, Rawson Associates, New York.

*Quality is usually measured in defects per 100 vehicles. In 1992, the average U.S. automotive maker had 136 defects per 100 vehicles. European cars were even worse with 158. Japan was far ahead with only 105 defects per 100 vehicles (not only Toyota but all Japanese carmakers). NUMMI, with only 83 defe...